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Volume :34 Issue : 129 2008      Add To Cart                                                                    Download

An Empirical Analysis of the Price-Volume Relationship in Kuwait Stock Exchange

Auther : Dr. Husain AL-Omar - Dr. Abdullah AL-Mutairi

     This paper is an attempt to study the Price-Volume Relationship in Kuwait Stock Exchange, during the period from 2002 to 2005 using daily aggregate data for the seven sectors in the market.

     Granger causality test is employed to investigate this relationship. Since this test requires stationary variables, stationarity test was performed on the data, and the results indicate that price index series are first difference stationary, while volume series are stationary in there level. Accordingly, price indices are used in their first difference, while volume series are used in their levels when applying causality test.

     Although the results indicate that in general causality runs from price to volume, sub-period analysis shows mixed results from no causality to bidirectional causality, especially on sector-wise analysis. These results reflect the typical features of an emerging stock market in which speculation, and rumors are the dominant factors affecting trading.

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